An outside supplier has offered to make and sell the part

Reference no: EM13581500

An outside supplier has offered to make and sell the part to the company for $23.60 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $3,200 of these allocated general overhead costs would be avoided. In addition, the space used to produce part U13 would be used to make more of one of the company's other products, generating an additional segment margin of $13,400 per year for that product.

What would be the impact on the company's overall net operating income of buying part U13 from the outside supplier?

Reference no: EM13581500

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